Disability insurers and producers have spent the past few years working to explain why income protection matters.
Today, “it does seem as if employers are more aware of it,” says Carol Tavella, a senior manager at Smart Business Advisory and Consulting L.L.C., Devon, Pa.
Robert Taylor, president of the Council for Disability Awareness, Portland, Maine, says he hopes the increased awareness will buffer the group and individual disability markets against the economic downturn.
“Disability doesn’t go on hold or take a holiday” because of a slump, Taylor says. During a slump, “the need for disability protection may be even more pronounced.”
In the health insurance market, almost everyone understands the need for the product, but cost is a major concern.
In the disability market, experts say, cost tends to be a much smaller concern.
During the first half of 2008, for example, the average premium for group long-term disability insurance was just $212 per insured per year, according to JHA, Portland, Maine. The average group LTD price was actually 6% lower than the average for the first half of 2007, JHA says.
In recent years, JHA marketing experts have told disability insurers that lack of awareness of disability and disability insurance has been limiting their opportunities to expand.
JHA executives screened a video showing a series of Portland residents expressing confusion about the product.
For the past 2 years, the Life and Health Insurance Foundation for Education, Arlington, Va., has responded to that confusion by organizing a disability insurance awareness month each year.
Aflac Inc., Columbus, Ga., has put the Aflac Duck to work marketing accident insurance related products, and other carriers have responded to the LIFE disability month program and the Aflac Duck by ramping up disability insurance outreach efforts.
The campaigns may be paying off.
When researchers surveyed residents of the United States and other countries about a year ago for a unit of AXA S.A., Paris, they found that 73% of the U.S. residents reported thinking about the risk of permanent disability, compared with an average of 59% of the survey participants in the other countries studied.
Possibly as a result, total combined group short-term and long-term disability premium revenue increased 6% between the first half of 2007 and the first half of 2008, to $6.7 billion, according to JHA.
Here is a review of some of the other forces that could shape the market in the coming year.
1. The weak economy may hit employee counts and benefits packages hard and lead to an increase in claims.
The total number of U.S. adults ages 16 and older with civilian jobs fell 1.7% between November 2007 and November 2008, to 145 million.
When the economy softens, “you always see an impact on people’s financial security,” Taylor says. The slump could affect disability insurance sales and carriers’ efforts to retain existing cases, he adds.
Executives at Unum Group Corp., Chattanooga, Tenn., said in November at the company’s investor day conference that they are assuming the overall unemployment level could rise to 8% or higher in 2009.
Unum cares more about the unemployment rate for the pool of people that it insures–which includes many government workers and health care workers–and less about the overall rate, executives said.
But the company’s assumption is that “there is going to be potentially a little bit of pressure on the top line,” Unum President Thomas Watjen said during an investor day presentation. The company is assuming that a weak economy may lead to an increase in claims, even though it has not yet noticed any such trend, he said.